A Brief Q and A Guide to Short Sales

Real estate investing is not just a get rich scheme wherein people can buy and sell houses in the blink of an eye. For the most part, this type of investment venture requires a lot of patience, determination, and hard work in order to achieve its full potential. These three qualities are particularly essential in the field of short sales.

In order to explain what a short sale really is, here are some questions that a lot of new real estate investors ask when faced with this topic:

· Question: Why is it called a short sale?

Answer: This type of arrangement got its name from its setup wherein a seller’s property is sold for less than what he owes in order to pay his debts to a lender. The profit from the sale of the property falls short of the balance that a homeowner owes a lender.

· Question: Who can qualify in this kind of sale?

Answer: Sellers who are eligible candidates for short sales are homeowners who have accumulated a debt that is bigger than the value of the property. People who do not have enough sources of equity in order to undergo foreclosure are also eligible for this option. In addition, individuals who are on the verge of bankruptcy can also go for this kind of sale for these properties.

· Question: What are the requirements needed in this type of sale? The seller of the property needs to prepare certain documents in order to do a discounted sale. However, these requirements depend on the type of lender that the seller is dealing with.

· Question: How does a real estate investor profit from this kind of sale? The investor serves as the buyer in this process. Getting the bank to approve a short sale enables the buyer to acquire the property at a discounted rate. Therefore, a buyer can earn from a home either by selling it quickly at a marginally higher price, or by fixing it up and then reselling it.

· Question: How long does an investor have to wait until the approval of a short sale? Pre-foreclosure properties should have at least a 90-day window before applying for a short sale. The approval process can take from two to four months depending on the number of loans or mortgages that were taken out of the property. This is where investors can use really high levels of patience.